The risk/reward confusion

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It’s easy to to adopt the policy of avoiding risk at all costs, that whenever possible, the products you launch or the engagements you have should be flawless and without downside.

Here’s the problem: in most endeavors, a small increase in risk can double the reward. It’s the second doubling of reward that brings serious risk with it. But the first leap is relatively painless.

In the chart above, notice that going from point A to point B brings almost no incremental risk. It might feel scary, but rationally, it’s not. Doubling reward again from B to C, though, brings significant incremental risk. It’s this second doubling that gets you through the Dip, that leads to a breakthrough, that makes you remarkable.

But I’m not even talking about that. I’m just hoping you’ll warm up by making the tiny leap of avoiding all risk. Riskless is hardly worth your effort.